While the S&P 500 has risen an astounding 25% over the past 12 months, not all stocks in the benchmark index have joined the rally: Several blue-chip healthcare stocks have fallen more than 25% from their record highs less than a year ago.
of stocks Pfizer (NYSE: PFE), Bristol-Myers Squibb (NYSE: BMY)and CVS Health (NYSE: CVS) Though stock prices are falling, their dividend programs remain strong, and here’s why investors can count on these dividend stocks to keep growing their payouts for at least the next decade.
1. Pfizer
Pfizer shares are down about 31% over the past 12 months. While the drugmaker’s development pipeline is churning out new medicines, the stock market has struggled to accept how sharply sales of its COVID vaccine, Comirnaty, and antiviral treatment, Paxlovid, have fallen.
Pfizer has steadily raised its dividend every year since 2009, despite declining sales. At its recent stock price, it offers a strong 6.1% yield, and investors can expect annual increases to continue for at least the next decade.
Sales of Comirnaty and Paxlovid fell more than 60% year over year to $2.4 billion in the first quarter. Management expects further declines for these drugs, but the worst is over and the dividend remains well protected. It expects adjusted earnings per share to be in the range of $2.15 to $2.35, more than what’s needed to meet the dividend commitment, currently set at $1.68 per share annually.
Pfizer reported first-quarter sales, excluding Comirnaty and Paxlovid, rose 11% from the same period last year, and with nine new drugs approved by the Food and Drug Administration in 2023 alone, investors can expect continued growth over the next decade.
2. Bristol-Myers Squibb
Bristol-Myers Squibb shares are down about 35% from their peak last summer. Even with the drop in value, the pharmaceutical giant’s stock still offers a handsome yield of 5.7%.
The company’s shares have been under pressure recently after management lowered its adjusted earnings outlook to a range of $0.40 to $0.70 per share from previous guidance of $7.10 to $7.40.
The devastating earnings adjustment is largely the result of the company’s $14 billion acquisition of Karuna Therapeutics, which closed in March. The pharmaceutical giant will record a one-time charge of about $12 billion, but the asset it acquired, KarXT, may be worth it.
The FDA is currently reviewing an application that could make KarXT the first schizophrenia treatment that does not directly block dopamine receptors. The FDA plans to announce its approval decision for KarXT by September 26, 2024.
With Bristol-Myers Squibb’s stock trading at a low valuation, about seven times its free cash flow over the past year, investors who buy and hold onto this battered pharma stock now have a great opportunity to beat the market over the long term.
3. CVS Health
We’re all familiar with CVS Health, the big retail pharmacy chain, and you probably aren’t aware that the company also owns one of the big three pharmacy chains. Pharmacy Benefits Manager corporations and the large health insurer Aetna.
CVS Health shares are down about 27% from their all-time high in January. At recent prices, the health-care conglomerate is yielding 4.4%, unusually high for a stock known for rapid dividend growth. CVS Health has grown its dividend by 142% over the past decade by vertically integrating its various health-care businesses.
The company’s shares have fallen recently due to rising usage of its services and lower-than-expected redemption rates. Medicare Advantage member.
While Medicare Advantage profits may decline slightly for CVS Health, strong secular tailwinds could help the company’s profits grow again. The Centers for Medicare and Medicaid Services projects U.S. national health care spending will grow 4.1% to $4.5 trillion in 2022. Over the decade through 2032, the government agency projects overall health care spending growth will accelerate to 5.6% annually.
Rising healthcare costs seem like an unstoppable trend. As a leader in the vertically integrated healthcare industry, CVS Health is well positioned to grow its dividend substantially over the next decade.
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Corey Renauer The Motley Fool has invested in and recommends Bristol-Myers Squibb and Pfizer. The Motley Fool recommends CVS Health. The Motley Fool has invested in and recommends Bristol-Myers Squibb and Pfizer. The Motley Fool recommends CVS Health. The Motley Fool Disclosure Policy.
3 S&P 500 stocks with high dividends that have fallen by more than 25% should be bought now and held for at least 10 years Originally published on The Motley Fool
